‘Debit cards can build credit,’ plus other bad advice this debt expert wants you to ignore

1. Bad advice: You should refinance your house to pay down credit card debt

The last thing you want to do if you’re struggling to pay off your credit card is to put yourself in jeopardy of losing your home as well.

Borrowers typically refinance their home if they want to lower the interest rate on their mortgage, and thus lower their monthly payments.

But when you refinance your home in order to free up money to afford payments on your credit card debt, you’re converting unsecured debt (credit card debt) to secured debt (mortgage), Tayne says.

“Refinancing your home to pay down credit card debt can be a bad idea because secured debt means that if you fail to make payments on the debt, the lender has collateral they can use to satisfy the debt,” she says.

In other words, if you prioritize paying off your credit cards and end up defaulting on your mortgage, you could end losing your home. 

Not to mention, there are closing costs and fees associated with a refinance and you could end up paying more for the debt than was necessary.

2. Bad advice: Use balance transfers to “pay off” credit card debt

A balance transfer credit card can let you take advantage of zero interest while paying off your debt, but there are a few caveats to consider before applying for one.

Firstly, your credit score matters. Most balance transfer cards, like the Citi® Double Cash Card, the Citi Simplicity® Card and the U.S. Bank Visa® Platinum Card, require good or excellent credit to qualify. The Aspire Platinum Mastercard® is one that allows people with fair credit to apply, but the introductory 0% APR period is much shorter than those for better qualified candidates (just six months, compared to over a year with other cards).

Even if you do get approved for a balance transfer card with less-than-stellar credit, your credit limit on that new card will be considerably low.

If you have a lower line of credit on your balance transfer card, then there’s a limit to how much you can move over to the new card. And you could end up with a high credit utilization ratio on the new card because you are using up much of your available credit. A high balance on a card, coupled with a low credit limit, means a higher utilization rate overall and that can cause you to have a lower credit score.

But Tayne also emphasizes that you’ll want to review your budget before considering a balance transfer. “If you don’t have the funds in your budget to pay down the debt over the 0% period, you’re merely shifting the debt around and ultimately making the problem worse by delaying it,” Tayne says.

Do your research before applying for a balance transfer card to ensure it’s worth it. A hard inquiry shows up on your credit report each time you apply for a new credit card (which dings your credit temporarily) and some balance transfer cards have high APRs after the intro period ends. Plus, many cards also charge balance transfer fees, so research what is the best fit for you and those with no fees.

3. Bad advice: Borrow from your 401(k) to pay down debt

Withdrawing from your 401(k) early is hardly ever a good idea, even if it seems like your only choice when you are in a financial bind. 

Taking money out — with or without a penalty — will only further set back your retirement savings goal.

“If you borrow from your retirement plan to pay down debt, you lose out on earnings, potentially delay your retirement plans and make it more challenging to build the fund, depending on your age and cash flow needs,” Tayne says.

Even in the case of the recent stimulus package, which relieves Americans of the penalty fee when withdrawing from their 401(k), there are still taxes that will be applied when you pay the loan back. “You’ll be using taxed income to do so, meaning you’re paying back more than you borrowed because of taxes,” Tayne says. 

4. Bad advice: “To have great credit, all you have to do is make sure to pay at least minimums every month”  

While making consistent and on-time payments on your credit card bills each month is a surefire way to build good credit, it’s best to pay your balances off in full if you can.

If you don’t pay your balance in full each month, you’ll get stuck with high APR charges. And those charges grow more each month thanks to compound interest.

To see how compound interest works with your credit card interest rates, take a look at the table below. Using 5-, 10- and 15-year timelines, you can see the affect of a 16.61% interest rate (the average credit card APR by the Federal Reserve’s most recent data) on a $6,194 credit card balance (Americans’ average credit card debt). Assuming that you’re only making the minimum payment, the compounded interest alone adds up to be quite expensive over time — so much that it surpasses your initial balance after 10 years.

	Total credit card balance	Interest accumulated
After 10 years	$15,698	$6,540
After 15 years	$26,355	$10,657
After 5 years	$9,158	$2,964
Principal amount	$6,194	$0

Since paying only the minimum on your credit card can put you much further in debt — and increase your utilization rate over time — Tayne advises cardholders to create a budget that allows them to pay their balance off each month and stick to it. Consider 0% APR credit cards, like the Wells Fargo Platinum Card and the Amex EveryDay® Credit Card, to avoid paying interest on any new purchases when you carry a balance for an certain period of time.

“Having good credit is more than making on-time payments and minimum payments,” she says. “Many additional factors go into the scoring models.”

5. Bad advice: “Once you damage your credit score, it cannot be rebuilt”

Your credit score can always improve, it just takes time.

While missed or late payments reported to the credit bureaus will stay on your credit report for seven years, they have less of a negative impact on your credit score with each year that passes. This timing rule is also true for bankruptcy filings and foreclosures that end up on your credit report; as the years progress, their impact lessens.

If you’re looking to recover from damaged credit, know that there is light at the end of the tunnel. Work on paying your bills on time, in full and maintain a low credit utilization rate. You can also get help negotiating your credit card debt by speaking to a local debt-relief lawyer or debt professional. Check with your state attorney general and/or local consumer protection agency for a reputable debt-relief law firm or contact the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies to see how someone there can help you.

“There is hope and a chance to rebuild poor credit scores,” Tayne says. “Resolving debt through settlement also doesn’t irreparably damage your credit.”

6. Bad advice: “Debit cards can build credit”

Debit and credit cards are two entirely different things. When you use a debit card, the money is withdrawn directly from your checking account. Debit card (and other prepaid card) activity does not get reported to the credit bureaus, it will never end up on your credit report and it has no direct influence on your credit score.

If you’re looking to build credit, a debit card won’t help and in fact using only debit can harm you. Tayne recommends those new to credit start by applying for a secured credit card. Secured cards, such as the Capital One® Secured and the Citi® Secured Mastercard®, are for beginners as they don’t require good credit to qualify. Many require a security deposit up front that acts as your credit limit, but allow you to graduate to an unsecured card once you prove you can handle monthly bill payments on time and in full.

How to Build Credit

Building credit can be tricky. If you don’t have a credit history, it’s hard to get a loan, a credit card or even an apartment.

But how are you supposed to show a history of responsible repayment if no one will give you credit in the first place?

Several tools can help you establish a credit history:

• If your aim is to get a credit card, you could start with a secured credit card or co-signed card, or ask to be authorized user on another person’s card.
• If you want to build credit without a credit card, you might try a credit-builder loan, secured loan or co-signed loan. There are also ways to use rent, phone and utility payments to build credit.

5 ways to build credit

1. GET A SECURED CREDIT CARD

If you’re building your credit score from scratch, you’ll likely need to start with a secured credit card. A secured card is backed by a cash deposit you make upfront; the deposit amount is usually the same as your credit limit.

You’ll use the card like any other credit card: Buy things, make a payment on or before the due date, incur interest if you don’t pay your balance in full. You’ll receive your deposit back when you close the account.

NerdWallet regularly reviews and ranks the best secured credit card options.

Secured credit cards aren’t meant to be used forever. The purpose of a secured card is to build your credit enough to qualify for an unsecured card — a card without a deposit and with better benefits. Choose a secured card with a low annual fee and make sure it reports to all three credit bureaus, Equifax, Experian and TransUnion.

2. GET A CREDIT-BUILDER LOAN OR A SECURED LOAN

A credit-builder loan is exactly what it sounds like — its sole purpose is to help people build credit.

Typically, the money you borrow is held by the lender in an account and not released to you until the loan is repaid. It’s a forced savings program of sorts, and your payments are reported to credit bureaus. These loans are most often offered by credit unions or community banks; at least one lender offers them online.

Another option: If you have money on deposit in a bank or credit union, see about a secured loan for credit-building. With these, the collateral is money in your account or certificate of deposit. The interest rate is typically a bit higher than the interest you're earning on the account, but it may be significantly lower than your other options.

3. USE A CO-SIGNER

It’s also possible to get a loan or an unsecured credit card using a co-signer. But be sure that you and the co-signer understand that the co-signer is on the hook for the full amount owed if you don't pay.

4. BECOME AN AUTHORIZED USER

A family member or significant other may be willing to add you as an authorized user on his or her card. Doing so adds that card's payment history to your credit files, so you'll want a primary user who has a long history of paying on time. In addition, being added as an authorized user can reduce the amount of time it takes to generate a FICO score.

You don't have to use — or even possess — the credit card at all in order to benefit from being an authorized user.

Ask the primary cardholder to find out whether the card issuer reports authorized user activity to the credit bureaus. That activity generally is reported, but you’ll want to make sure — otherwise, your credit-building efforts may be wasted.

You should come to an agreement on whether and how you’ll use the card before you’re added as an authorized user, and be prepared to pay your share if that's the deal you strike.

5. GET CREDIT FOR THE BILLS YOU PAY

How to Rehire Furloughed Employees

You furloughed your employees, and now you want to bring them back. Do you know how to rehire furloughed employees?

Like hiring workers for the first time, rehiring furloughed employees requires careful thought and consideration, some paperwork footwork, and detailed recordkeeping.  

How to rehire furloughed employees 

Whether you are bringing back furloughed employees for PPP loan forgiveness or are simply ready for more hands on deck, you need to know how to rehire furloughed employees. 

1. Create a plan

First things first: you need to create a return-to-work plan outlining new procedures, staff members, and employee responsibilities. If you’re bringing furloughed employees back during COVID-19, you likely have new sanitation guidelines all employees must adhere to.

You may not be able to end the furlough immediately for all your workers. So, you must figure out which furloughed employees you are able to bring back. You might adapt your company’s budget to verify you can afford to bring back workers.

2. Draft your return from furlough notice

Create a written return from furlough notice and send it to the worker. That way, you have a paper trail showing that you sent the notice (as well as when you sent it). 

Give the employee plenty of time when sending your return from furlough notice. Don’t send the notice the day before you expect the employee to return to work. 

Include ample information in the notice so the employee knows what they’re agreeing to if they come back to work. 

Your return from furlough notice should include things like:

• Employment offer
• Return-to-work date
• Changes in job duties
• Employment status (e.g., hours)
• Pay and benefits information
• New procedures (e.g., COVID-19 safety procedures)
• Employee deadline to respond to the letter

3. Bring employees back

The furloughed employee is not required to accept your rehire offer. They may have found another job. Or, maybe they don’t want to come back to work. 

But if a furloughed employee does accept your offer to return from furlough, you can bring them back. 

Provide information on job responsibilities, especially if they’ve changed since the employee was furloughed. Conduct background checks, if applicable. And, add the employee back on payroll. 

Generally, furloughed employees remain on employer-sponsored health plans, unlike laid-off workers whose COBRA coverage might kick in. But if you removed the furloughed employee from company-sponsored benefits, distribute paperwork and reinstate them as appropriate. 

4. Keep documents in your records

Whenever you do something employee-related, you need to keep detailed records, especially when hiring or terminating employees. 

Depending on how long the employee has been furloughed, you may need to brush up some of your original onboarding paperwork (e.g., background check). And if you make any changes to the employee’s pay rate, pay frequency, or employment status (e.g., full-time vs. part-time employment), you need to record it.

If you’re bringing back furloughed employees in response to receiving a PPP loan, keep documents detailing things like:

• A copy of the return from furlough notice
• When you sent the return from furlough notice
• The employee’s response to your rehire offer (i.e., whether they accepted or declined)
• What day the employee resumed work
• Pay-related information 

5. Consult an expert 

Situations may differ. Your state might set different rules for rehiring furloughed employees based on how long they were furloughed for. 

For example, depending on how long the employee was furloughed, you may need to: 

• Update or complete a new Form I-9
• Conduct a background check or drug test

How to Pay Employees: Types of Payment You Can Offer

How do you pay your employees? With checks? Direct deposit? Other? There are a number of ways to pay employees, especially as money continues moving into the digital sphere. If you want to know how to pay employees, take a look at your options.

And boy, do you have options. You can cut employees a check, deposit money directly into an account, or hand them an envelope filled with cash. 

So, which options are the best ones for your business? Read on to compare the payment methods for employees. 

How to pay employees 

Knowing which employee payment method to use is just part of the fun. Before you get to the distributing wages step of the payroll process, you need to calculate employees’ gross wages and withhold taxes and other deductions. 

However, this article won’t get into the nitty-gritty details of the payroll process. Instead, it’ll focus on different ways to pay employees, including check, direct deposit, pay cards, cash, and mobile wallet. 

Find out how to pay your employees by looking at the different types of methods and seeing which one makes the most sense for your business. Pay attention to costs and your employer responsibilities, too. 

Paycheck

Paying employees with paychecks is one of the most popular payment methods. You may consider paying your employees by either writing or printing payroll checks. 

Unlike payment methods involving electronic funds transfers (e.g., direct deposit), employees do not need to have bank accounts to receive their wages via check. Instead, employees can use a check-cashing service (for a fee) to receive their wages. 

Before deciding to offer this payment method, consider the pros and cons. For example, some employees may prefer the privacy of receiving paychecks because they don’t need to share banking information. But, paychecks can get lost or stolen.  

Time and cost of using paychecks 

Handwriting a paycheck can be time-consuming for employers. Writing out checks each pay period takes time, especially if you have a number of employees. 

If you decide to print your employees’ paychecks, you can save considerable time from writing them all out. But if something goes wrong with your printer (or if you run out of ink), you may have to resort to handwriting checks. 

Plan to spend money on blank checks if you handwrite checks. And if you print paychecks, you need check stock, ink, and a printer. You might even need a special MICR printer with magnetic ink. 

Direct deposit

Direct deposit is the most common payment method, with 82% of U.S. workers using it. One of the biggest benefits of direct deposit is convenience. 

With direct deposit, there’s no need to physically hand an employee their wages. So, if you or an employee is on vacation, direct deposit recipients will still receive their wages on time. 

Once you receive an employee’s banking information, you can directly deposit their wages each pay period through an electronic funds transfer (EFT). 

Before deciding to use direct deposit, understand the time frame for processing. If you do not run payroll by a certain day, your employees won’t receive their wages when expected unless you expedite the process or use another payment method.  

Time and cost of direct deposit 

Direct deposit is a relatively quick process, unless you miss your time frame for processing. Generally, the most time-consuming part is setting up direct deposit. 

Keep in mind that direct deposit comes with some fees you need to know about. You may need to pay set-up fees, monthly fees, and a small fee per pay period. Set-up fees could range from $50-$149, and transaction fees might be $1.50 per transaction. 

However, you may not be responsible for footing the direct deposit bill. If you have online payroll software, direct deposit might be incorporated at no added cost. Check to see if your payroll software provider offers direct deposit at no additional cost.  

Payroll cards

A pay card (or payroll card) is a prepaid card that employers can use to pay employees. Each payday, the card is loaded with the employee’s wages for that pay period. 

Employees can use the pay card like a debit card, or they can withdraw wages through an ATM or bank cashier. Unlike direct deposit, employees do not need a bank account to receive their wages. 

Time and cost of pay cards 

Although using pay cards can save you time, there are a number of fees associated with this method. 

In addition to set-up costs, employees may incur fees. Depending on your state, you may be required to pay these fees for your employees. 

Cash

Paying employees cash is another type of payment you have at your disposal. But if you decide to pay employees in cash, you must be extra careful when it comes to keeping records. 

Cash payments to employees might make the IRS suspicious that you aren’t taking out the correct tax amounts.

Paying employees in cash makes it more difficult for you to keep track of payroll records. Unlike other payment methods, there isn’t an automatic audit trail (e.g., bank records) when you pay in cash. 

Time and cost of paying cash 

Paying employees in cash does not require immediate fees like with direct deposit, payroll cards, and paychecks. 

But, paying in cash puts you at a higher risk for an IRS audit, which costs significant time and money. 

Mobile wallet

Another payment option increasing in popularity is the use of mobile wallets (e.g., Venmo or Apple Pay). 

Mobile wallets for payroll require you to deposit employee wages into their phone’s electronic accounts. Employees with mobile wallets can use the funds in their accounts to directly make purchases. 

Time and cost of mobile wallets

Depositing money into an employee’s mobile wallet is a relatively streamlined process for both employees and employers. 

But before choosing mobile wallets as your payment method of choice, think about the associated fees. Fortunately, the fees for person-to-person transfers are either nonexistent or small when paying with a bank account. 

However, employees may have to pay a fee when withdrawing money from their mobile wallet.  

Providing a pay stub 

Depending on your business location, you may be required to provide a pay stub to your employees—regardless of their payment method. Pay attention to pay stub requirements by state to stay compliant. 

So, what is a pay stub? Pay stubs show employees their gross pay, deductions, and net pay. Think of a pay stub like a receipt that shows employees you’ve paid them. 

Payroll recordkeeping 

Regardless of the payment methods for employees, you need to keep accurate records for at least three years. 

Detail information like the date, amount, and pay period for all employees. And, record gross wages, deductions, and net pay. 

How to pay your employees: What not to do

Can an employer require direct deposit, pay cards, cash, paychecks, or mobile wallets? 

Most states have laws that regulate when you can make certain types of payment mandatory, like direct deposit and pay cards. Typically, you will need to offer more than one payment method to your employees.

For example, you can offer employees the option to receive their wages via direct deposit or through paper checks. That way, employees without bank accounts can receive their wages.

When choosing how to pay employees, don’t violate state laws. Work with your employees to ensure the payment method works for them.

Business Interruption Insurance: Protecting Your Company from the Unexpected

Your business is your pride and joy. And if you’re like most owners, you’ll do whatever it takes to protect it at all costs. But, you can’t always protect your company from unexpected events, like natural disasters. To keep your business safe and help it stay afloat if disaster strikes, consider investing in business interruption insurance. Read on to learn about interruption insurance, including whether or not it covers coronavirus-related claims.

What is business interruption insurance?

Business interruption insurance, also known as business income insurance, is coverage that replaces business income lost due to a disaster. The insurance can help a business continue to pay its bills while it is temporarily closed because of a disaster.

Typically, business interruption insurance is a part of a business insurance policy. In most cases, it is not a standalone insurance policy business owners can purchase.

Keep in mind that the definition of “disaster” may vary depending on your business’s insurer. Business interruption insurance may cover the following types of disasters:

• Fire
• Wind
• Storm
• Theft
• Damage to property (e.g., tree falls)
• Other natural disasters


• Who can receive interruption insurance?

  Any business owner can get business interruption insurance through their insurance company. Many business owners get interruption insurance if they have a physical business location that needs protected from covered disasters (e.g., property damage).
  Small businesses may get a policy that includes things like property, liability, and business interruption coverage.
  Home-based businesses and self-employed individuals may also be able to receive business interruption coverage through a homeowners insurance policy.

  What does it cover?

  Business interruption insurance covers a number of expenses that a company may not be able to pay due to a disaster, including:
  • Lost revenue
  • Fixed costs (e.g., operating expenses)
  • Relocation costs
  • Commission and training costs
  • Employee wages
  • Taxes
  • Loan payments
  • Mortgage, rent, and lease payments
  Generally, business interruption insurance doesn’t cover utilities, short interruptions (e.g., power outage), or partial interruptions (e.g., scaled-back operations).
  Your business interruption insurance likely also has a restoration period. A restoration period is the length of time that your policy helps pay for lost income and expenses while you restore your business. Some plans cover up to 12 months of losses while others can cover up to 18 or 24 months.
  Business interruption insurance coverage varies. For example, some insurance companies may cover relocation expenses while others might not. Check with your insurer to see what is covered under your business interruption insurance policy.

  How much does it cost?

  The cost for business interruption coverage depends on your insurance agency, industry, number of employees, and the amount of coverage you need.
  Rates may also vary depending on your location and amount of risk. If your business is located in an area with an increased risk of natural disasters (e.g., hurricanes), you may need to pay more than businesses in lower-risk areas.
  Before you invest in a business interruption policy, determine a dollar amount for the coverage limit by looking at things like profits for 12 – 24 months and related expenses (e.g., payroll and relocation costs). That way, you can be prepared when you discuss insurance options with your provider.

  How do you get business interruption insurance?

  To get business interruption insurance, talk to your insurance provider about your options. If you don’t already have interruption insurance, your business’s insurance provider may be able to add it on to your plan.
  Do your homework before committing to a provider or plan. Find out what each potential insurance provider covers for your business and compare pricing.

  Do I need a business interruption policy?

  You never know when disaster is going to strike your business. So, it’s always better to be safe than sorry. If you’re not sure if your business needs interruption insurance, consider the pros and cons of getting insurance and think about the following questions:
  • Where is my business located?
  • Am I in a high-risk or low-risk area?
  • Have other businesses near me experienced a disaster?
  • Will getting insurance be better for my business in the long-run?

  Business interruption insurance and COVID-19

  So, the question and answer you’ve all been waiting for: Does business interruption insurance cover coronavirus claims and temporary business closure due to pandemics? The answer … probably not.
  In most cases, business interruption insurance only covers lost income and expenses for property damage-related claims due to a disaster (e.g., hurricane). Most business interruptions policies likely will not cover lost profits from the coronavirus or any future pandemics.
  Standard interruption insurance doesn’t cover claims related to incidents like the COVID-19 pandemic. However, it all depends on the insurer and the contract. Most policies specifically exclude losses from pandemics because they impact all companies simultaneously. Many insurers began adding virus and pandemic exclusions to their business interruption insurance policies after the SARS outbreak in 2003.
  The language of the contract can play a huge role in whether or not things like the coronavirus are covered. Policies that don’t specifically exclude viruses may be able to provide some type of coverage for businesses that had to temporarily close down due to the coronavirus crisis. Check with your insurance provider to find out whether you can claim coronavirus-related losses under your policy
  Have questions, comments, or concerns about this post? Like us on Facebook, and let’s get talking!
  This is not intended as legal advice;

What Is the Penalty for Late Tax Return?

Forgetting to submit your tax return can be stressful. And even worse, the IRS can charge you a late filing penalty. Read on to learn about the penalty for late tax return and what you can do to avoid future penalties.

Penalty for late tax return

If you earn or receive income, you likely need to file an annual tax return, like Form 1040, U.S. Individual Income Tax Return. You use Form 1040 to report income and deductions to the IRS.

The individual tax return due date is April 15 each year. If the due date falls on a weekend or holiday, your tax return moves to the next business date. If you forget to submit your tax return by April 15, you may receive a penalty from the IRS.

If you own a business, your business structure impacts your business tax return due date.

What is the penalty for late tax return? The penalty you receive for a late tax return depends on your situation.

Common reasons for late tax return penalties include:

• Failing to file your tax return by the due date
• Failing to pay the taxes you report on your return by the due date
• Not paying enough taxes for the year with estimated tax payments

The IRS calculates your penalties based on the above factors. To get a full breakdown of different penalties for failing to file or pay your tax return, visit the IRS’s website.

Whether or not you owe money to the IRS has a huge impact on the penalties you receive.  And in some situations, the IRS does not penalize you.

No penalties

If you don’t owe any money, you have little to worry about. Taxpayers who submit a late tax return and don’t owe money typically are not penalized.

Although you won’t be penalized, you should still file your tax return as soon as possible. For tax year 2018, the absolute latest you can file is April 15, 2022. If you file an extension, your tax return is due by October 15, 2022.

If you miss your Form 1040 deadline, your refunds are turned over to the U.S. Treasury.

Again, you do not receive a late penalty if you are receiving a tax refund and you do not owe money to the IRS.

Penalties for businesses

If you own a business and miss your deadline for filing, the IRS says you should file your business tax return as soon as possible. And if you owe business taxes, pay those as soon as possible.

Depending on the business and situation, you might receive a small financial penalty for a late filing or payment (e.g., interest fees). But in most cases, the IRS will accept your late payment with little hassle.

If you’re close to your deadline or miss it, consider e-Filing your late return if possible to speed up the process.

Late filing and payment penalties

Ultimately, the penalty you receive depends on whether your filing or payment is late. Take a look at the different types of penalties for paying or filing your tax return late.

Late filing penalties

You will likely receive a late filing penalty if one of the following is true:

• You owe taxes and didn’t file your return or extension by April 15
• You filed an extension but did not file your return by October 15

Late filing penalties can include:

• Paying 5% of the additional taxes owed for every month your return is late, up to a maximum of 25%
• If you file more than 60 days after the due date, you must pay the minimum penalty of $205 or 100% of your unpaid tax, whichever is higher

Late payment penalties

Late payment penalties apply if you did not pay taxes owed by April 15, regardless of if you filed an extension.

If you’re guilty of the above, penalties you’re subject to include:

• Paying 0.5% of the additional tax you owe for every month your tax remains unpaid, up to a max of 25%

If there are any months where both the late payment and filing payment penalties apply to you, the IRS waives the 0.5% late payment penalty.

Interest fees

Interest compounds daily and starts accumulating on unpaid taxes the day after your due date until your bill is paid off. Currently, the interest rate is 5%.

How to pay late tax return penalty

In most cases, the IRS will mail you a letter stating how much you owe in penalties.

If you need to pay a late tax return penalty, follow the instructions in your penalty letter and submit your filing or payment to the IRS as soon as possible.

If you can’t pay taxes on time or file your tax return, contact the IRS for additional options (e.g., installment plan).

Penalty relief

Before you begin paying off your penalties, look into penalty relief. Eligible individuals and businesses may be excused from paying certain penalties.

Penalties eligible for relief include:

• Failing to file a tax return
• Forgetting to pay taxes on time
• Not depositing certain taxes

If you made an effort to comply with IRS requirements but were unable to meet your obligations because of circumstances beyond your control, you may be able to take advantage of penalty relief.

Check out the IRS’s website for more information about whether or not you qualify for penalty relief.

Avoiding a late tax return penalty

Forgetting to submit a tax return can happen to anybody. To help avoid being tardy on future tax returns, use the tips below:

• Prepare and pay (if applicable) your tax return in advance (e.g., one month before the due date)
• Add reminders on your calendar to help remember your due date
• Have a designated person remind you about your tax return due date
• Create a plan in case you forget to submit your tax return
• Use software so you aren’t scrambling to put your records together
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• Randall Jenkins is the Owner of Jenkins Tax Services & Business Consulting LLC

This is not intended as legal advice;